Rising inventories due mostly to GM

Inventories of unsold vehicles have been essentially flat across the U.S. auto industry in the past year, with one notable exception: General Motors.

GM's inventory as of May 1 reached a 9.5-year high, up 37 percent from a year ago. The inventories of all other automakers combined rose just 0.6 percent.

GM, with U.S. market share of 17.1 percent so far this year, now accounts for 22 percent of total industry inventory. Company executives say the buildup was deliberate in anticipation of multiple plants going offline this fall for retooling, and that supplies will fall to more normal levels by the end of the year.

However, stocks of GM's full-size pickups -- expected to be redesigned next year -- and its four crossovers with redesigns launching this year are responsible for less than half of GM's inventory growth.

With auto sales slowing and discounts already at heights unseen since the recession, GM has waded into territory that could spell trouble if its forecasts prove too optimistic.

"The inventory build leaves some question as to whether GM might see payback later in the year," Barclays Capital analyst Brian Johnson wrote in a recent report, "either via higher incentives or production cuts, which would reduce earnings upside."

GM had a 100-day supply of light trucks and 97 days' worth of cars as of May 1. The 934,300 units it had at dealers and in transit was the most since November 2007, a month before the economy officially plunged into a recession.

GM CFO Chuck Stevens has said the carmaker would reduce its inventory to about a 90-day supply by the end of June and 70 days by year end, matching the level it had at the start of 2017. He said the buildup so far this year was intentional and not a concern. "Typically, you build inventory in the first quarter anyway, because the spring selling season starts," Stevens said April 28. 

Stevens said about half of the inventory growth in recent months has been tied to planned downtime, which includes 13 weeks in the third quarter. The shutdowns will affect multiple plants, including several that make pickups. 

On Friday, GM began a monthlong shutdown at a crossover plant near Lansing, Mich. After reopening, the plant will assemble redesigned versions of the Chevrolet Traverse and Buick Enclave, though on only two daily shifts instead of the three it had previously. 

Cars accounted for just 27 percent of GM's May 1 inventory, which is in line with their proportion of company sales. GM already cut production shifts at three car plants in Michigan and Ohio in the first quarter. 

Overall, the U.S. industry started May with a 76-day supply, well above the 67-day average for that date over the previous 25 years. May stocks were three days higher than on April 1, which was also nine days above the long-term average for that date. 

In units, U.S. inventory was 4,157,200 on May 1, down 34,500 from April 1. Only April's slower selling rate made the May 1 days supply higher. 

After U.S. sales set records in each of the past two years, 2017 sales through first the four months are 2.4 percent lower. Since May 2016, when stocks were near historic norms, industry inventory jumped 272,500 units from 3.88 million. GM accounted for 93 percent of that gain, or all but 19,500.